California is requiring more women on boards. It may not...

1of20FILE - In this Thursday, June 30, 2016, file photo, State Sen. Hannah-Beth Jackson, D-Santa Barbara, responds to a question from Sen. Anthony Cannella R-Ceres, at the Capitol in Sacramento, Calif. California has become the first state to require publicly traded companies to include women on their boards of directors by 2020, according to a law signed Sunday by Gov. Jerry Brown. Having more women on boards will make companies more successful, says state Sen. Hannah-Beth Jackson, who authored the bill SB826. She believes having more women in power could also help reduce sexual assault and harassment in the workplace. (AP Photo/Rich Pedroncelli, File)Photo: Rich Pedroncelli / Associated Press 2016 file photo

2of20Click through the gallery to see the most interesting and peculiar laws in California as of fall 2018.Photo: FRED TANNEAU/AFP/GETTY

3of20New rules for relocating your bees. If you want to relocate a colony of bees, you need to notify the agricultural commissioner in the county where the bees are going within 72 hours, rather than the previously stipulated 5 days. Also, if you want to relocate your apiary within a given county, you now have to notify the agricultural commissioner, whereas before notification was only needed if you were moving between counties.Photo: FRED TANNEAU, AFP/Getty Images

4of20Surfing is now the official state sport of California (AB 1782). "The world’s first neoprene wetsuit, a modern staple of surfing, was invented in California’s San Francisco Bay area," the law reads. It also acknowledges the role of indigenous people in developing the sport of surfing in Hawaii and California.Photo: Chris Rogers, Associated Press

5of20Optometrists can no longer have more than 11 offices. Also, optometrists now need a statement of licensure to practice at each of their branch offices (SB 1386).Photo: Ulysses S. Romero/Laredo Morning Times

7of20July 2018 is officially declared "'Parks Make Life Better!' Month" (ACR-248). Sadly, this resolution, which boasted the finest mid-name exclamation point since Panic! At the Disco, was passed after 'Parks Make Life Better!' Month had already come and gone. 'Parks Make Life Better!' Month will never know how much it meant to us. Sometimes the brightest stars burn out the fastest. Sometimes it takes two and a half months to pass a resolution saying that parks are good.Photo: Michael Macor, The Chronicle

8of20Starting next summer, the California Board of Podiatric Medicine will become the Podiatric Medical Board of California (AB 2457).Photo: Eric O'Connell

9of20There are a lot of changes to the rules about electrically conductive balloons (but strangely, manned hot-air balloons are exempt). AB 2450 changes some offenses related to manufacturing and distributing electrically conductive balloons from misdemeanors to civil offenses, but requires manufacturers to print their names on the outside of their balloons and warn customers about fire risks if the balloons hit power lines.Photo: Marvin Pfeiffer, San Antonio Express-News

10of20Now the Department of Alcoholic Beverage Control can issue licenses for cemeteries to sell booze if they're over 100 years old and designated monuments by the city of Los Angeles, among other criteria (AB 1217).Photo: Ryan Pelham / The Enterprise

11of20There's a new maximum fee for applying to be certified as a geologist in training: $100 (AB 1098).Photo: Patrick Tehan / Special to the Chronicle

12of20Extraordinarily scenic rivers must be preserved in their free-flowing state (AB 2975).Photo: Jessica Christian / The Chronicle

14of20New rules for mobile livestock slaughter Under old laws, people who slaughter meat they raise on their own premises are exempt from being licensed as a slaughterhouse or meat processing establishment. Now, that exemption is being expanded to mobile slaughter operators who slaughter livestock that the owner didn't raise, but the slaughter happens on the land where the livestock was raised (AB 2114).Photo: Ryan Remiorz, Associated Press

16of20A section of Route 185 in San Leandro will no longer be a part of the state highway system (AB 2473).Photo: Mike Kepka, The Chronicle

17of20Public universities must now list the cost of their institutionally-operated housing and meal plans on their websites and in their advertising materials when talking about costs (AB 1961).Photo: Paul Chinn, The Chronicle

18of20Twenty percent of driver's license tests administered must now include a question about the dangers of unsecured ladders, buckets, and other loose items (AB 1925).Photo: James Tensuan / Special to the Chronicle

19of20Kids can't be fined for failing to wear a bike helmet if their guardian delivers proof that they have a helmet and have completed a safety course within 120 days of the citation (AB 3077).Photo: Ava_Marie/Getty Images/iStockphoto

California’s groundbreaking new law requiring some companies to add women to their boards of directors may soon face legal scrutiny.

On Sunday, Gov. Jerry Brown signedSB826, which requires public companies with headquarters in California to have at least one female director by the end of next year. By 2021, the mandate grows to two women for five-board members and three women for boards of six or more members. Firms failing to comply face a fine.

But some legal experts say the measure violates the federal and state constitutions, by in effect requiring companies to discriminate against men wanting to serve on boards. It also, they say, compels firms to prioritize gender over other aspects of diversity such as race and ethnicity.

Another likely hurdle: Many California companies are actually incorporated outside the state — particularly in Delaware, thanks to that state’s business-friendly laws. Federal law makes it clear that a company is subject to rules concerning its internal affairs in the state where it is incorporated, not the state in which it is headquartered, according to Joseph Grundfest, a corporate governance expert at Stanford Law School.

“All of these corporations headquartered in California but chartered in Delaware, they’re going to be able to explain that the law doesn’t apply to them,” said Grundfest, who has written extensively on the measure as well as the internal affairs doctrine, a legal precedent derived from the Commerce Clause of the U.S. Constitution which recognizes that only one state should have the authority to regulate a company’s internal affairs. “The reality is there’s going to be litigation, and California will lose based on the internal affairs doctrine.”

According to Grundfest, the internal affairs doctrine means that California’s first-in-the-nation law applies to only 72 corporations headquartered and chartered in California. Even if the law stands up to litigation, it will have a “trivial effect,” Grundfest said.

Apple, chartered in California and headquartered in Cupertino, is the only Fortune 500 company that would need to add a woman to its board, according to Grundfest’s research. It already has two female directors, but by 2021 it would need to bring on a third. Apple declined to comment.

Grundfest didn’t name a specific company that might challenge the law, but he and other legal experts said they expect firms that do not want to comply with the law, as well as groups fighting for equality for underrepresented minorities in the workplace, to challenge it in federal court.

Yet the idea that companies will sue to avoid adding women to their boards seems to ignore the tremendous public relations problem that would come with litigation.

Kellie McElhaney, director of the Center for Equity, Gender, and Leadership at UC Berkeley’s Haas School of Business, said she encourages companies she consults for to support the law because it makes strong business sense. Studies show that companies with diverse boards tend to perform better because they are likely to mirror their customers and clients.

“Corporate leaders who are suffering from bad press would capitalize on this as a way to show that they are working toward solutions” rather than sue to avoid complying with the law, McElhaney said.

Several California trade groups have opposed the bill, with the California Chamber of Commerce as the most vocal among them. The chamber argued against the bill for singling out gender.

State Sen. Hannah-Beth Jackson, D-Santa Barbara, the bill’s author, said she considers the law “a positive step” in increasing corporate diversity. She is optimistic that once the rule is in place, companies would see the benefits of having more women on their boards and would take additional measures to include people of different races and ethnicities.

Brown seems well aware of the potential pitfalls.

“I don’t minimize the potential flaws that indeed may prove fatal to its ultimate implementation,” he wrote Sunday in a signing statement. “Nevertheless, recent events in Washington, D.C. — and beyond — make it crystal clear that many are not getting the message.”

Melia Russell is a business reporter at The San Francisco Chronicle, where she covers tech culture and labor issues in Silicon Valley. Prior to joining The Chronicle, she started as an intern at Business Insider in 2013 and spent five years at the digital news site. Melia has degrees in magazine journalism and information management and technology from Syracuse University.